House Dems eye new 1099 repeal

Lawmakers on both sides of the aisle hate an onerous tax-reporting requirement in the health care reform law.

They just have a funny way of showing it.

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Senate Democrats voted down a Republican plan to repeal the provision Tuesday — the same day that Senate Republicans voted down a Democratic plan to repeal the measure.

Now Democrats on the House Ways and Means Committee are considering a new push to repeal the provision, and a floor vote could come as soon as next week. But their plan, like all of the others, comes with strings attached that will make it virtually impossible for the other party to sign on.

The provision in question requires any business that spends more than $600 with a particular vendor to report the expenditure on a 1099 tax form. Lawmakers from both parties say that it’s too onerous and would bury businesses — particularly small ones — in a sea of unnecessary paperwork.

But no one has come up with a way to cover the $17 billion cost of repealing the provision — or at least not way that doesn’t turn off too many lawmakers on the other side of the aisle.

The new Democratic plan would offset the $17 billion loss by taxing carried interest, a move Republicans and at least some moderate Democrats are likely to oppose. “They want to put Republicans in the corner and make carried interest a pay-for,” said an aide to a moderate Democrat.

Another proposal under consideration is to pay for it by changing Grantor Retained Annuity Trust inheritance rules. Moderate Democrats worry that leadership won’t go for it because Republicans might actually support it; some Democrats are reluctant to let through any legislation that would let Republicans claim success in repealing part of health care reform.

The new House bill would be brought up under regular rules, according to aides familiar with it. In July, the House brought up a similar amendment, proposed by Rep. Scott Murphy (D-N.Y.), under suspension. Republicans opposed it because of its new taxes, and it didn’t generate the two-thirds support that was required.

Republicans have proposed paying for the bill by removing money from the health law’s prevention fund and altering the tax subsidies to buy insurance coverage — proposals Democrats have quickly rejected. Prior Democratic plans have involved taxing oil companies and closing tax loopholes, and Republicans have declined to sign on.